DBRS Comments on Vale’s Purchase of Copper Refining Assets in Brazil

DBRS notes that Vale S.A. (Vale or the Company) today announced that it intends launch a public offer to buy for cash up to 100% of common shares of Paranapanema S.A. (Paranapanema), a leading producer of refined copper in Brazil with a copper smelter/refinery and three production plants for downstream copper products. Paranapanema also operates a phosphate fertilizer plant in Brazil. The estimated cost of the transaction as currently contemplated and assuming acquisition of 100% of the Paranapanema common shares is approximately $1.1 billion (2.0 billion reais). The Paranapanema transaction is consistent with Vale’s desire to increase its presence in base metal production and to enhance its growing copper production capabilities in Brazil. DBRS views the transaction as well within Vale’s existing financial resources, and although it is a positive addition to the Company’s business profile in copper and to a lesser extent fertilizers, the transaction is not sufficiently material to warrant any rating action.

The offer for Paranapanema is expected to be made in early September 2010 and will be subject to the purchase of at least 50% plus one of Paranapanema’s common shares, among other conditions.

Vale, headquartered in Brazil, is one of the largest mining companies in the world, with a solid business base in the production of iron ore-related products, nickel, aluminum and copper. The Company also produces and sells manganese, ferroalloys and kaolin, as well as bauxite, alumina, coal, cobalt, precious metals and fertilizers. Vale continues to aggressively expand its operations by organic growth and acquisitions, both supported by a sound financial profile and good liquidity.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate rating.